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Writer's pictureCassady Schiller

PPP Forgiveness FAQs (August 4, 2020)

On August 4, 2020, the SBA released a list of FAQs related to the PPP forgiveness process. Our team has read each of these updates, along with consultation with our independent governing body, and has summarized the key highlights below. There were other clarifying points that have not altered our previous positions and communications to you. The full list of SBA Forgiveness FAQs can be found at the following link:

General Loan Information

  1. Sole proprietors, independent contractors, and self-employed individuals who had no employees at the time their PPP loan application was filed AND did not include employee compensation (outside of themselves) as part of their PPP loan application, automatically qualify to use Forgiveness Application Form 3508EZ (or lender equivalent).

  2. Borrowers will not be obligated to make any required payments against their PPP loan until the SBA has remitted the forgiveness amount to the lender. If a loan is fully forgiven, the borrower is not responsible for any payments. If the PPP loan is partially forgiven, or the forgiveness application is denied, the borrower is responsible for making required payments against both the unforgiven loan principal and accrued interest on such principal from the date of loan origination.

Payroll Costs

  1. Borrowers whose payroll cycle pays twice a month or less frequent will need to calculate payroll costs for partial pay periods. Borrowers whose payroll cycle is bi-weekly or more frequent do not need to account for partial pay periods.

  2. Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay, whether earned or paid as a replacement for such compensation lost during the covered period.

  3. Forgiveness is not provided for group health care expense accelerated from periods outside the Covered Period or Alternative Payroll Covered Period.

  4. Forgiveness is not provided for employer contributions for retirement benefits accelerated from periods outside the Covered Period or Alternative Payroll Covered Period.

  5. An owner-employee is defined as someone who received cash compensation from a business where they also hold an ownership stake within the same business. Forgiveness of total payroll compensation, inclusive of both cash and non-cash compensation, paid to such individuals is capped at $15,385 (8-week period) or $20,833 (24-week period) in total across all business in which he or she has an ownership stake.

    1. C Corporations forgiveness may include, but capped per above amounts:

      1. Cash compensation (i.e. salary) capped at 8/52 (8-week period) or 2.5/12 (24-week period) of owner-employee’s 2019 cash compensation.

      2. Retirement benefits capped at 8/52 (8-week period) or 2.5/12 (24-week period) of owner-employee’s 2019 employer retirement contribution.

      3. Full amount of borrower-paid contributions for the owner-employee’s health insurance.

      4. Full amount of borrower-paid state and local taxes.


  1. S Corporations forgiveness may include, but capped per above amounts:

    1. Cash compensation (i.e. salary) capped at 8/52 (8-week period) or 2.5/12 (24-week period) of owner-employee’s 2019 cash compensation.

    2. Retirement benefits capped at 8/52 (8-week period) or 2.5/12 (24-week period) of owner-employee’s 2019 employer retirement contribution.

    3. Full amount of borrower-paid state and local taxes.

    4. Borrower-paid contributions for health insurance are not eligible for S-Corporation employees with at least 2% stake in the business.


  1. Partnership (for General Partners only) forgiveness may include, but capped per above amounts:

    1. Compensation of general partners is capped at 8/52 (8-week period) or 2.5/12 (24-week period) of general partner’s 2019 net earnings from self-employment that is subject to self-employment tax multiplied by 0.9235.

    2. Compensation must have been paid during the Covered Period or Alternative Payroll Covered Period.

    3. Borrower’s payments for health insurance, retirement benefits, and state and local taxes are not eligible for forgiveness.


  1. Self-Employed (Schedule C / Schedule F) forgiveness may include, but capped per above amounts:

    1. Compensation of self-employed individuals is capped at 8/52 (8-week period) or 2.5/12 (24-week period) of 2019 net profit (Schedule C, Line 31 / Schedule F, Line 34).

    2. Borrower’s payments for health insurance, retirement benefits, and state and local taxes are not eligible for forgiveness.



Nonpayroll Costs

  1. Nonpayroll costs must be paid or incurred during the Covered Period to be eligible for forgiveness, even if the borrower elects to use the Alternative Payroll Covered Period for payroll costs.

  2. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Such interest is an eligible use of PPP loan proceeds, but is not eligible for forgiveness.

  3. Payments of interest on debt secured by the business’ real or personal property (i.e. an auto loan) is eligible for forgiveness.

  4. Transportation refers to transportation utility fees assessed by state and local governments. More information can be found at the following link:

The Department of the Treasury’s interim final rule (IFR) issued on April 14th indicated that gas used when driving a business vehicle is a forgivable transportation expense.

Forgiveness Reductions

  1. Borrowers who made an attempt to rehire employees, but were unable to do so, should maintain the following documentation:

    1. Written offer to rehire an individual.

    2. Written record of the offer’s rejection.

    3. Written record of effort to hire a similarly qualified individual.

    4. Record informing the state unemployment insurance office of such employee’s rejected rehire offer within 30 days of the employee’s rejection of the offer.


  1. When computing an employee’s salary and hourly wage threshold (i.e. the allowable 25% reduction to an employee’s pay rate) for purposes of forgiveness reductions, borrowers do not include bonuses or commissions that were paid during the historical comparison period when computing the base wage rate. Therefore, borrowers should only take into account an employee’s normal salary or wages.

Please reach out to us with any questions.

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